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No bubble in commodities prices - Jessica Cross, CEO of Virtual Metals
In an interview on ClassicFM @ 18:00 on Friday, 28 July 2006
[miningmx.com] -- Commodity prices are seen "stronger for longer" and there's no bubble in the market, Jessica Cross, chief executive from Virtual Metals says.
It is easy to see why people think there is a boom-bust situation in the commodities markets when looking at copper, but the reality is different, Cross said on the Classic Business Day radio show.
"But really the facts don’t match up to that - what we are saying is prices stronger for longer. Really there’s a remarkably tight market, and it’s the same with nickel and obviously aluminum as well," Cross said.
Years of low prices have resulted in primary producers slowing their capital investment for new supply. They were caught off guard by the strength of Chinese demand, she said.
"So you’ve had falling inventories - now there’s not much consensus about how much inventory is around, but we seem to think
that the exchanges in terms of copper are only holding about two weeks of consumption," she said.
"So you’re looking at extremely tight markets. So they’ve found fundamentals as to why this is not a dotcom-type bubble," she said.
China's consumption growth is seen strong over the next five years on the back of investment into infrastructure, and fixed investment. Overarching all that is the investment in the Olympics and the urbanisation of nine million Chinese each year.
"This is having a huge impact on the amount of copper that China is importing."
The growth in base metals prices would be felt in precious metals too, she said.
"If you look at the base metals - and you see the funds are coming in on the basis that there are tight fundamentals - then the precious metals begin to benefit as well, particularly the platinum group metals (PGMs) where there’s a very strong industrial base," she said.
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